Cash flow basics for growing businesses

Consider a month in which you invoice ₹10 lakh of work at a healthy margin. On paper, the month is profitable. But if customers pay in 45 days, while salaries are due on the last day of the month and suppliers want payment in 15 days, the money you need to spend leaves your account weeks before the money you earned arrives.

That timing gap is the cash conversion cycle: how long cash is tied up between paying for the work and being paid for it. The longer it is, the more cash the business needs to operate.

Growth usually means paying for more — stock, staff, marketing, tools — before the extra sales turn into cash. A business growing quickly can therefore feel short of cash precisely when things are going well. Planning for it is what separates healthy growth from a crisis.

A rolling 13-week forecast — roughly one quarter, week by week — is detailed enough to act on and short enough to keep accurate. A simple version:

1. Start with today's cash balance across your business accounts.
2. List expected cash in, week by week: invoices due, based on when customers actually tend to pay rather than the due date; expected settlements from card and online payments; any other receipts.
3. List expected cash out, week by week: salaries, rent, supplier payments, taxes, loan repayments, subscriptions.
4. Calculate the closing balance for each week. Any week that falls below your comfort level is a warning.
5. Update it weekly, replacing forecasts with actuals and adding a new week at the end.

Bring cash in sooner

• invoice immediately, and make invoices easy to pay (see reducing overdue invoices);
• take deposits or milestone payments on larger work;
• offer payment methods that settle quickly and that your customers prefer;
• follow up on overdue invoices consistently.

Time cash out carefully

• pay suppliers on the agreed due date — not early by default, and never late;
• negotiate payment terms that match your own collection cycle where you can;
• review recurring subscriptions and costs regularly.

Keep a buffer

Aim to hold enough cash to cover a period of essential costs, so that one late customer payment does not become a problem.

• you check the bank balance before approving routine payments;
• the amount of overdue receivables keeps rising;
• supplier payments are being pushed back to make payroll;
• your forecast keeps being wrong in the same direction.

Any of these is a reason to review your forecast and collection process now rather than at month end.